Insider in Full: Walking the talk at QBE
The correct response to inappropriate comments, or an overreaction that sacrificed a respected CEO part-way through a sorely needed turnaround programme?...
We don’t know what former QBE CEO Pat Regan said, so the abstract fairness of the board’s decision to send him packing after less than three years can’t be judged.
But the “workplace communications” misstep by the British executive certainly prompted what was surely one of the speediest external inquiries in corporate history. His departure followed a complaint reportedly made about 10 days ago by a woman working at QBE North America.
In a sign that Regan’s lapse probably wasn’t of the most serious variety, QBE acknowledged the “challenging circumstances” of the debacle and thanked the outgoing chief for his hard work while emphasising that “all employees must be held to the same standards”.
But still, given current workplace realities, QBE probably had little choice but to take the hardest of lines.
The #MeToo campaign began in earnest almost three years ago, and the fact that language deemed to clash with a company’s goal of creating a “respectful and inclusive environment” can dethrone a CEO demonstrates how fast thinking has evolved.
Scrutiny of non-financial misconduct now extends way beyond allegations of sexual assault, and a zero-tolerance approach to remarks deemed potentially offensive has taken hold.
This is not just a PR issue, nor even mainly a legal one, but a regulatory concern and – depending on the industry – one that can significantly impact the financial performance of a company.
Within financial services, culture is in regulators’ line of sight as never before. In Australia, the Royal Commission on the industry contained a raft of recommendations for both firms and watchdogs.
In the UK, meanwhile, tough governance and certification rules initially designed for errant bankers have been rolled out to insurance carriers and brokers, and supervisors have made clear healthy cultures are germane to the framework.
Lloyd’s has moved fast on its own behavioural makeover after negative publicity, and most recently introduced quotas for senior female leaders. All the while, the watchful eye of the Prudential Regulation Authority has been trained on the overhaul.
Corporations also appear to have bought into the message that better-behaved and more inclusive workplaces make good business sense.
QBE governance previously hit the headlines when its board chastised and cut the bonus of the then-CEO John Neal for failing to disclose an office romance. With its action this week, QBE may find itself something of a trailblazer for a sector that has historically erred on the side of sweeping such complaints under the carpet to protect top executives and star performers.
But still the loss of its CEO at this time is a terrible blow.
It comes after Covid-19 pushed the carrier $712mn into the red in the first half and threatens to complicate a turnaround that briefly looked to have taken hold.
Shares in QBE closed down 6.3% yesterday as at least one investor complained of being kept in the dark.
As well as investor disquiet on such occasions, “reverse #MeToo” actions remain a risk, but many outgoing executives would prefer to put the episode behind them as soon as possible – in Regan’s case it looks probable he had a hand in the statement eventually issued.
But what is clear is the situation is messy and the scope for infractions is huge.
Florence Brocklesby, founder of employment specialist Bellevue Law, notes that the rapid evolution of corporate mores has left some executives struggling to keep up. “Generational clashes” around what constitutes acceptable behaviour are a particular risk, she warns.
As such, she urges absolute clarity from the top of an organisation about what is acceptable and what is not.
In the particular case of Regan, that QBE is unlikely ever to divulge what the former CEO did wrong makes this a little harder.
But as the Australian carrier determined, it is clear that senior executives need to walk the talk when it comes to conduct.
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